Question:
I can only afford to pay 500 pesos toward my credit card balance, which has now ballooned to 108,000 pesos. The bank is threatening to file a complaint against me. What are the legal consequences I could face under Philippine law?
Answer:
Delinquency and Collections Process
When you fail to make the minimum payment on your credit card, you become delinquent. In the Philippines, banks usually have a collections process that involves sending reminders and notices, and possibly imposing penalties and late fees. If your account remains delinquent for an extended period, the bank may escalate the matter to legal action.
Civil Case for Collection of Sum of Money
The bank can file a civil case for the collection of a sum of money. If they win the case, a court may issue an order obliging you to pay your outstanding balance, plus possible legal fees and interests. Failure to comply with such an order could result in your property being seized or your income garnished to satisfy the debt.
No Criminal Liability for Simple Non-Payment
Under Philippine law, simple non-payment of debt is generally not a criminal offense. However, issuing bouncing checks or using fraudulent means to incur debt could result in criminal charges like estafa or violation of the Bouncing Checks Law (BP 22).
CMAP Listing
Your credit history might be negatively impacted, and you could be listed in the Credit Management Association of the Philippines (CMAP), making it difficult for you to apply for loans or other financial products in the future.
Legal Fees and Costs
If the bank decides to pursue a civil case, they may ask you to pay for their legal fees, which will add to your financial burden.
Negotiation and Restructuring
Before it reaches the point of legal action, it's often in both parties' best interest to negotiate a restructuring of the debt, where you agree to a new, more manageable repayment schedule. Note that banks are more inclined to negotiate if they see that you are making a sincere effort to pay off your debt.
Conclusion:
Failure to pay your credit card balance can result in a cascade of penalties, additional fees, and legal actions. While simple non-payment is not a criminal offense in the Philippines, it can still lead to a civil case and damage your credit history. If you find yourself unable to meet your obligations, consulting a financial advisor or a lawyer for advice on debt restructuring or negotiation is advisable.